Everybody's loss

Record prevent plant acres will hurt economy

August 14, 2011

Farmers weren't the only ones whose finances were drowned out this spring after constant rain made planting difficult in some areas and impossible in others.

Mike Rose, who retired as North Dakota State University Ward County Extension agent July 15, said during an interview before his retirement the economic impact to Ward County alone from all that unseeded cropland could be hundreds of millions of dollars. He said determining the loss isn't a perfect science, but with the help of Dwight Aakre, NDSU Extension farm management specialist, a formula was used to estimate the impact all that wet ground had on the bottom line of Ward County's economy.

"We just took the six major crops and determined how much money would be lost by not getting those crops planted and harvested based on current prices and typical yields," Rose said. "And then we subtracted the prevent plant payment that farmers get from their insurance company when they don't plant."

The six crops were spring wheat, durum, barley, oil sunflower, canola and flax. The formula to determine economic loss takes the prevent plant payment for the crop not planted and subtracts it from the crop's market value, with the difference being multiplied by 3.47. The resulting number is multiplied by the number of acres not planted.

The multiplier effect of 3.47 basically represents the money not being spent and re-spent within a community.

"So if you don't have money available, then it's not spent by the farmer, it's in turn not spent by local agribusinesses. And so that money keeps continuing to turn over within the community," Rose said. "And that number that we use is 3.47. And so you take that multiplier effect times all the acres that aren't planted in Ward County and it's going to be a very big number."

Calculating loss

That number this year turned out to be big. The USDA recently released its estimates for acres of cropland across the state that are in prevent plant due to excessive moisture. Ward County led the state in prevent plant acres last year, and does so again this year. While last year was bad enough at 131,000 acres of prevent plant, this year was worse with 576,000 acres estimated to be in prevent plant.

To put that in perspective, Ward County has a total of 907,825 cropland acres, meaning that more than half the county's cropland did not get planted this year.

In the formula Rose and Aakre used, the market value of the crop not produced was $341.66 per acre, while the prevent plant payment subtracted from it was $155.10 per acre. The difference of the two $186.56 is then multiplied by 3.47 to get $647.36, which is how much each acre of cropland that wasn't able to be planted was worth. Multiplying $647.36 by the 576,000 acres of cropland in Ward County in prevent plant means the county took close to $373 million in losses, a staggering blow to the economy. This is just an estimate, but regardless of the exact figure, the economic loss is a tremendous one.

Although the dominant crops and prevent plant payments are different in other parts of the state, the formula can still be used to get a ballpark figure of how North Dakota as a whole might be affected. Of the state's 28,157,907 cropland acres, 6,287,673 were estimated to be in prevent plant. Applying the economic loss formula developed for Ward County to the state prevent plant acres yields a statewide loss of over $4 billion. It's not a scientifically exact number, but still gives a good idea of how high the state's agricultural losses will be this year.

It's not just the farmers who will suffer, either. Rose said any agribusiness that works with a farmer will also be affected. This includes equipment dealers, processors, transportation companies and chemical dealers, just to name a few.

"It impacts all agribusinesses if they handle inputs that farmers use," Rose said. "And of course even family living. If a farmer's family living is reduced, then they spend less money on consumer items in addition that."

Rose said many of those companies also had to fight floodwaters, so they were being hit in two different directions.

Implications

The average consumer without any direct ties to agriculture is also affected, albeit it in different ways.

"As our general economy gets worse that affects everybody because there's less tax money available to support infrastructure," Rose said. "And then, of course, we have crop issues worldwide. In the southern United States there's drought issues, the Corn Belt has late planting issues, China and Russia have drought issues. So if our crop production goes down, food availability is less and food costs go higher."

Although a lot of issues are having a major impact on crops in Ward County, specifically and North Dakota in general, the Souris River flood isn't one of them. Grant Buck, executive director of Ward County Farm Service Agency, said any cropland along the river that got flooded was more than likely already in trouble long before the Souris jumped its banks.

"I think a lot of the crop that would be along the river was impacted before the flood," Buck said. "Even if it wouldn't have flooded, it was wet."

Buck said hayland and pastureland along the river were probably hit harder by the flood, although he has no specific numbers on what those losses might be.

"We've had a few people inquire and check programs we'd have available, but there haven't been numerous calls regarding that," Buck said. "I'm sure there's some fencing that's been taken out, but not any real (large losses of crops or animals due to the flood). I think people probably had enough warning to prepare, like for livestock and things like that."

Even though the outlook is dark, Rose said this is something farmers, agribusinesses and everybody else in Ward County and the rest of North Dakota can bounce back from. There have been a few wet years in a row, but all it takes is one good year to start putting everything back on track.

"The key right now is we can rebound and have a good growing season next year where we can get our crop planted and harvest a good crop next year," Rose said. "That's going to be extremely important. We can see the ramifications as far as soil health issues when we don't plant a crop, especially when we don't plant a crop a couple of years in a row. It has a dramatic negative impact on soil health, with salinity problems, standing water, weed issues, and all of those things affecting soil health. So it's going to be really important, especially after these last two years of prevent plant acres, that we get our crop planted next year."